New Delhi/Bengaluru: Rocket Internet-backed food ordering firm Foodpanda will soon dabble in e-commerce deliveries as the firm looks at increasing utilization of its delivery fleet as well as explore multiple revenue channels.
The company is partnering with e-commerce focused logistics company Ecom Express to facilitate last-mile deliveries to the consumer’s doorstep using its own fleet of delivery executives, said chief executive at Foodpanda India Saurabh Kochhar.
Ecom Express also held initial talks with hyper-local food delivery start-up Swiggy, said three people aware of the development. A partnership with Swiggy is yet to materialize, they added.
T.A.Krishnan, co-founder and chief executive at Ecom Express, declined to comment.
Swiggy has denied the development.
Kochhar said a pilot will be launched in September in Delhi and Gurgaon. The company plans to expand the services to Hyderabad, Bangalore and Pune if the pilot becomes a success.
“Since the project is in pilot mode, it will be too early to project revenue. But the collaboration is a win-win for both Foodpanda and Ecom Express,”said Kochhar.
“Food will always be our priority and our primary business. Such initiatives are aimed to improve the efficiency of the business across the lean times during the day as well.”
Ecom Express is likely to pay the food delivery firms a fee on every packet delivered, one of the person quoted above said.
Food delivery companies maintain a fleet of delivery executives; a mix of people on their payrolls and those who come in at peak hours and are paid on the basis of number of orders delivered.
Foodpanda has about 1,500 delivery personnel. Ecom Express, on the other hand, has almost 15,000 delivery boys with them round the year.
However, most food delivery firms have been struggling with poor unit economics, as cost of delivery far exceeds revenue per delivery.
Consequently, food delivery companies such as Foodpanda are exploring additional revenue sources to make the most of their fleet during non-peak hours. The non- peak hours for food delivery companies are usually before noon and between 3pm and 7pm.
According to industry experts, the average order value for food in the US is around $20, significantly more than the average Rs.300 in India.
As a result, delivery companies in India which charge clients a commission of 10-20% of the order value end up losing money as every delivery costs more than Rs.50.
“For most companies, there are variable costs attached with the people who are on their payroll. So if they have to monetize the fleet beyond their own work, they probably will have to engage them in activities like this,” said the person quoted above.
While such partnerships will help the food delivery companies generate additional revenue, it will allow Ecom Express to increase its capacity of delivery.
The move by food delivery companies to branch out to e-commerce delivery is a sign of pressure, said industry experts.
“This is a signal that unit economics is under pressure to get the business right. Also they have to grow revenue in a sustainable manner. Diversification by early stage companies do not make sense. Diversification should better happen when the business has grown and saturated in the existing products and services,” said Rutvik Doshi, director at Inventus India Advisors.